A recent case has brought into focus a little known criterion that must be satisfied before you can get relief from capital gains tax on the sale of shares acquired under the Enterprise Investment Scheme.

In order to qualify for CGT relief, you must have had income tax relief on the original subscription.

This was not known to the victim in the case who had no income tax liability when he subscribed for the shares and so never made an income tax relief claim.

HMRC successfully defended their position when he took them to Tribunal.

The lesson to take from this is always make a claim for income tax relief when you acquire EIS shares even if there is little or no value to the claim. This might even necessitate creating taxable income where there might have been none. Without it, you may not get the CGT exemption you thought you would.